BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

 

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE NIOBRARA FORMATION, SAND WASH HORIZONTAL NIOBRARA FIELD, MOFFAT COUNTY, COLORADO

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CAUSE NO. 540

 

DOCKET NO. 161000410

 

TYPE: SPACING

 

ORDER NO. 540-63

 

REPORT OF THE COMMISSION

 

            The Commission heard this matter on October 24, 2016, at the Northeastern Junior College, Hayes Student Center Ballroom, 100 College Avenue, Sterling, Colorado, upon application for an order to establish an approximate 354.00-acre drilling and spacing unit for Sections 31 and 32, Township 5 North, Range 90 West, 6th P.M., and approve two wells within the unit, for the production of oil and associated hydrocarbons from the Niobrara Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.            GRMR Oil and Gas, LLC (Operator No. 10524) (“GRMR” or “Applicant”) is an interested party in the subject matter of the above-referenced hearing.

 

2.            Due notice of the time, place, and purpose of the hearing has been given in all respects as required by law.

 

3.            That the Commission has jurisdiction over the subject matter embraced in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act.

 

4.            Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that, on unspaced lands, wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply.

 

5.            On August 25, 2016), GRMR, by its attorneys, filed a verified Application (“Application”) pursuant to §34-60-116, C.R.S., for an order to establish an approximate 354-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve the Durham 1-31 Well (API #05-081-07622) and the Durham 2-31 Well (API #05-081-07620) (“Wells”) that are currently drilled in the proposed unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the productive interval of the wellbore to be located no closer than 400 feet from the unit boundaries, unless an exception is granted by the Director:

 

Township 5 North, Range 90 West, 6th P.M.,

Section 31:      Lots 6 (38.79), 11 (39.27), 12 (39.76), S½SE¼, NE¼SE¼

Section 32:      Lot 8 (36.18), W½SW¼

 

6.            On October 3, 2016, GRMR, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the Application and the supporting exhibits. Sworn testimony and exhibits were submitted in support of the Application.

 

7.            On January 5, 2016, GRMR, by its attorneys, and the Bureau of Land Management (“BLM”) agreed that the Application Lands contain federal minerals. As such, GRMR agreed to submit a Communitization Agreement to the BLM for any existing wells within 60 days of the entry of this order.

 

8.            Land testimony and exhibits submitted in support of the Application by Scott Hoenmans, Land Manager for GRMR, showed that GRMR holds oil and gas leasehold interests and has a right to drill in the Application Lands. Additionally, the land testimony showed that the Wells were drilled by SWEPI LP, as operator of the Williams Fork Federal Unit (COC74956X) (“Federal Unit”). The Wells were completed in July 2012 and are producing from the Niobrara Formation. In June 2014, SWEPI, LP, as the previous Federal Unit operator, submitted a Request for Paying Well Determination to the BLM for the Wells. In August, 2014, the BLM officially determined that the Wells were “not capable of producing unitized substances from the Niobrara Formation in paying quantities as defined by Section 9 of the unit agreement.” The Paying Well Determinations further state that the Durham No. 1-31 well requires a drilling and spacing unit must be established so that a communitization agreement can be approved by the Bureau of Land Management, and that the Durham No. 2-31 well should be handled on a lease basis. Consistent with the BLM’s direction, GRMR, as successor Federal Unit operator, filed its application requesting that the Application Lands be approved as a drilling and spacing unit for the Wells. Since some production from the Wells has been achieved, all proceeds from the production are currently being suspended pending approval of a drilling and spacing unit for the Wells. A drilling and spacing unit for the well will provide the legal basis to calculate and pay the proceeds from the Well’s production.

 

9.            Geologic testimony and exhibits submitted in support of the Application by Lyman A. Rudolph, Staff Geologist for GRMR, showed that the Niobrara Formation is present throughout the Application Lands and is approximately 350 to 450 feet thick, and is generally of uniform thickness through the Application Lands.

 

10.          Engineering testimony and exhibits submitted in support of the Application by Lewis S. Wandke, Senior Project Engineer for Petrotek Engineering Corporation, showed that the calculated drainage area for the Wells is estimated at 0.92 acres, and an approximate 354.00-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by the existing horizontal well producing oil, gas and associated hydrocarbons from the Niobrara Formation. Engineering testimony further showed that the Wells have produced approximately 16.5 MBOE barrels of oil and 1.1 MMCF of gas.

 

11.          The above-reference testimony and exhibits show that granting the Application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons, and will not violate correlative rights.        

12.          GRMR agreed to be bound by oral order of the Commission.

13.          Based on the facts stated in the verified Application, having received no protests, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to establish an approximate 354.00-acre drilling and spacing unit for Sections 31 and 32, Township 5 North, Range 90 West, 6th P.M., and approve two wells within the unit, for the production of oil and associated hydrocarbons from the Niobrara Formation.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.            An approximate 354-acre drilling and spacing unit for the below-described lands, is hereby established, and the Durham 1-31 Well (API #05-081-07622) and the Durham 2-31 Well (API #05-081-07620) Wells that are currently drilled in the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation:

 

Township 5 North, Range 90 West, 6th P.M.,

Section 31:      Lots 6 (38.79), 11 (39.27), 12 (39.76), S½SE¼, NE¼SE¼

Section 32:      Lot 8 (36.18), W½SW¼

 

2.            The productive interval of the wellbore will be located no closer than 400 feet from the unit boundaries, unless the Director grants an exception.

 

3.            GRMR shall submit a Communitization Agreement to the BLM for any existing wells within 60 days of the entry of this Order.

 

IT IS FURTHER ORDERED:

 

1.            The provisions contained in the above order shall become effective immediately.

2.            The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.           

3.            Under the State Administrative Procedure Act, the Commission considers this Order to be final agency action for purpose of judicial review within 35 days after the date this Order is mailed by the Commission.           

4.            An Application for Reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

 

ENTERED this 4th day of November, 2016, as of October 24, 2016.

 

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By__________________________________

Julie Murphy, Secretary